ECB today tried to get ahead of the curve – ING

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“With new TLTROs and a change to the forward guidance, the European Central Bank (ECB) today tried to get ahead of the curve. The measures demonstrate the ECB’s determination but will do little to tackle the drivers of the current slowdown,” notes Carsten Brzeski, Chief Economist at ING Germany.

Key quotes

“The measures as such are not such a big surprise but the timing of the announcement is. In our view, it is an attempt to stay ahead of the curve and to avoid unwarranted tightening of the ECB’s monetary stance. It is not an attempt to provide additional easing but rather an attempt to keep the balance sheet stable for a longer-than-expected period.”

“Any rate hikes for this year are definitely off the table. At the same time, however, today’s announcements have some flavour of panic as the ECB’s base case scenario still foresees a gradual recovery and the 2020 and 2021 forecasts were hardly revised downwards. Today’s announcements are also a bit of a gamble as they will do very little to tackle the biggest risks for the Eurozone economy, which according to the ECB stem from external sources.”

“In sum, the ECB’s current strategy clearly follows the idea of “if you can’t beat it, try to avoid it for as long as possible”, hoping that today’s measure are sufficient to put a floor under the current economic slowdown. Any next step from here to tackle a severe downswing of the economy would now require unprecedented measures. In any way, today’s ECB meeting clearly means that Mario Draghi will be the first ECB president who never hiked interest rates during his term in office.”

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